Rerating China's independent power producers 2.0: How ash can become cash

摘要

In China, the coal-to-power cycle has come a long way with rapid power capacity expansion driving coal prices stronger in the last 10 years. For the last two decades the coal-to-power sector in China has mostly favoured value creation for upstream coal mining companies while downstream power companies have been busy meeting national targets on power generation. This has resulted in sub-par profitability for power companies vs. coal producers and debt-ridden balance sheets. Current policy focus in China on orderly cooling down of economic growth and re-balancing of the energy mix in favour of renewable energy will likely ease out the aggressive push on IPP capacity addition while the outlook for coal prices could remain subdued in the medium term.